Topic I: Scarcity

I. Basic Concepts & Definitions A. Economics– How society attempts to satisfy unlimited wants with scarce resources 1. Scarcity– Lack of resources to satisfy wants… resources are limited while wants are unlimited (Rare is not Scarce) VS.

Scarcity Leads to Three Economic Questions Question 1: What Will Be Produced? Societies must decide on mix of goods to produce depends in part on their natural resources Some countries allow producers and consumers to decide In other countries, governments decide Must also decide how much to produce; choice depends on societies’ wants

Scarcity Leads to Three Economic Questions Question 2: How Will It Be Produced? Decisions on production methods involve using resources efficiently decisions influenced by a society’s natural resources Societies adopt different approaches with unskilled labor force, might use labor-intensive methods with skilled labor force, might use capital-intensive methods

Scarcity Leads to Three Economic Questions Question 3: For Whom Will It Be Produced? How goods and services are distributed involves two questions how should each person’s share be determined? how will goods and services be delivered to people?

a. Trade-0ff– Alternative choices when allocating scarce resources (choices)

Or, the value of the next best thing you gave up. b. Opportunity Cost– The cost/value of the next best alternative use of money, time or resources when a trade-off is made Or, the value of the next best thing you gave up.

B. Four Factors of Production– All goods and services require them in some way 1. Land Natural Resources

2. Labor Human effort

3. Capital Tools, Factories, & Machines * Financial Capital = $$$ Capital - Resources that people make and use to produce goods and services.

Where did I come from?

4. Entrepreneurship (time)  the economic motivation for an individual to attempt to make a profit from an idea

What role do entrepreneurs play? Brings the other factors of production together.

No Free Lunch… EVERYTHING has a cost… time, money, emotions, etc… it costs because of scarcity Prices ration our limited resources. Without scarcity there would be no need for prices and therefore no economic problem

What is the difference between a want and a need? Wants – desires for something Needs – necessary for survival